\ . JSS
THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
CASE NO: 271/94 IN THE SUPREME COURT OF APPEAL OF SOUTH AFRICA In the matter between:
J D PENNINGTON First Appellant M E SUMMERLEY Second Appellant and
THE STATE Respondent CORAM: SMALBERGER, HOWIE et PLEWMAN JJA
HEARD: 24, 25 MARCH 1997 DELIVERED: 16 May 1997
J U D G M E N T
/HOWIE JA...
HOWIE JA:
I agree in all respects with the reasons set out in the judgment of my Colleague Smalberger, save in regard to Count 1. As he indicates, the crucial issue on that count is whether at the time of the relevant representations and non-disclosures it is reasonably possibly true that a consortium existed or that accused 2 and 3 - primarily accused 3 - ever honestly intended that a consortium would subsequently be formed.
In that regard it does not assist the accused, in my opinion, that the formation of a consortium was openly declared, that sundry persons were approached to be members of it or that references to a consortium or its alleged members are to be found in the documentary evidence. One would expect to encounter such evidence whether the consortium was genuine or fraudulently fictitious. And in so far as the comparatively large measure of documentary evidence in this connection might seem to tip the balance in the accused's favour, it must be remembered that once the Registrar learnt of the NELSA share acquisition, made active
enquiries about it and set conditions for compliance to his satisfaction, generation of such documentation was unavoidable. Accordingly I think that the existence and tenor of this evidence are merely neutral considerations.
What is essential, in my view, is to assess the consortium issue in the proved factual context, in other words, against the broad picture. When UAL put forward the offer on 15 February 1982 to buy the NELSA shares, the accused's fraudulent machinations for the procurement of funds for the use and expansion of the Magnum Group were well established. 74 of the crimes laid to their charge had already been committed by the end of 1981. The Group had by then grown extensively but there was an ever-increasing need for more funds not only for its maintenance but, during 1982, also for its survival. It was in this climate that the accused decided to acquire, at roughly the same time, control of two companies with readily available resources of cash and quoted shares. One was NELSA and the other was I L Back. The
quantum of their cash and cashable assets was attractively large without the price being, to any curious observer, manifestly out of reach. In the case of I L Back no formalities beyond the usual were involved.
NELSA, however, was an insurer and s 27 bis of the Insurance Act posed complications. In terms of that section (since repealed) any acquisition of a quarter or more of an insurer's shares had to be reported to the Registrar. Accordingly it was not legally possible for a Magnum company to become the sole owner of the shares without notification to the Registrar and the inevitability of his close attention. There would have been no need for a consortium if a Magnum Company could have raised the purchase price and if its financial affairs and standing would have withstood the Registrar's scrutiny. One knows that MAL did indeed raise the price. But quite obviously investigation by the Registrar would have been unwelcome to say the least. In the circumstances it is not surprising that from the outset the existence of a consortium was alleged, of which every member would acquire less than
a quarter of the shares. On that basis it was unnecessary to give the required notification to the Registrar.
True to the accused's established scheme, the Back and NELSA acquisitions had hardly been effected when the cash and cashed assets of those companies were channelled through SABA to Magnum.
Even viewed in February, 1982 it is most unlikely that any interested prospective consortium members would have retained their interest had they known of that manoeuvre and the reasons for it. The improbability became steadily stronger as the year wore on, the membership of the consortium remained apparently unresolved and Magnum approached liquidation.
Consistent with the inference that the NELSA acquisition was by Magnum interests and no one else, was the fact of the pledge to RMB on 3 May 1982 by MAL of the existing 500 000 NELSA shares and the cession in security on 19 November 1982 of 1,5 million NELSA shares, also to RMB. (Only 1 million additional shares were issued in
August 1982 so that it is not clear whether the cession involved a miscalculation or a second pledge of the initial shares, but no matter.) Furthermore the pledge clearly purported to be of MAL's own property and in the deed of cession MFH guaranteed that it was the beneficial holder of the ceded shares.
Equally supportive of that inference were the circumstances of payment for the NELSA shares and the salient facts which accused 3 failed to tell the Registrar once communication with the latter became unavoidable. It was a provision of the offer document that ownership of the shares would vest in the alleged consortium on payment of the purchase price. But there is no evidence that such a consortium existed at the time or that it had appointed nominees. Nothing in the offer suggests that all that there was at the time was merely a contemplation that a consortium would in the future be formed. Had that been the case there would clearly have been an obligation to inform the Registrar that, despite the fact that the price had been paid on 15 February (it seems
through accused 3's personal bank account) by MAL, the shares would nonetheless later be transferred to named persons in a distribution which would avoid a contravention of s 27 bis. In fact, however, it was not at that time that any representation was made to the Registrar. He only learnt of the transaction because Cain (of NEG) insisted that he be informed. And it was only as a result of the Registrar raising a query that accused 3 wrote to him. That was on 29 June 1982. Purporting to "report on the financial position" of NELSA, accused 3 made no mention in the letter of the fact that MAL had paid for the shares and then, by journal entry, had debited the purchase price to MFH which, in turn, had debited an account in its books called "Investment in Nelsa".
(This, of course, meant that MFH was the owner of the shares.) The letter also failed to disclose that as early as 23 February 1982 and 7 March 1982 accused 2 and 3 had realised all NELSA's securities and proceeded to divert the proceeds to Magnum. Nor did the letter refer to the pledge to RMB. Accused 3 further purported to give the
Registrar details of each "shareholder", specifying different consortium members from those recorded in the offer document. They now included inter alios RMB (a gross improbability seeing that it was a pledgee) and Beckett. Beckett was forced in evidence to concede that he was never allocated shares or even had a definite participation in a consortium.
Also in conflict with the existence of a consortium were further vacillations in its alleged membership and the fact that, for inadequately explained reasons, no finality was ever reached in this regard. At a NELSA directors' meeting on 12 November 1982 it was announced that the Registrar had consented to NELSA's operating as an insurer thereby, in effect, giving the all-clear at last. Even at that late stage the Magnum spokesperson could reveal nothing more specific about the alleged consortium than that he sought the registration of the entire NELS A share capital in the name of the Summerley Family Trust, as nominees for "the beneficial owners". The latter, however, were not
named. The post-liquidation entries in MFH's records, apparently in acceptance of the existence of a consortium, were unexplained in evidence. They are, moreover, as questionable as the entire consortium version.
Then there are the numerous inconsistencies and irregularities, pointed out by the witness Heckroodt, pertaining to the allotment and recording of the consortium shares and related matters.
These are far more likely to have been occasioned by perfunctory and ill-directed efforts to maintain the pretence of a consortium than by almost chronically inefficient attempts to record the truth.
As far as the defence evidence in this connection is concerned, Beckett's testimony reads most unconvincingly. Accepting his honesty, the compelling reason for his vagueness, in my opinion, is that although the concept of a consortium was talked about, and, for reasons already given, talked about with a purpose, it was never proceeded with, or intended to be proceeded with.
10
The evidence of accused 3 relative to this count was unsatisfactory for all the reasons stated by the trial Judge. His conclusion that such evidence was to be rejected is amply supported by a study of the record.
In my opinion, therefore, the only reasonable inference is that although prospective new shareholders might have been solicited, the alleged consortium never existed and accused 2 and 3 at no time had the honest intention to bring it into being. It is further to be inferred that the story of a consortium was, viewed broadly, part and parcel of the fraudulent scheme to procure funds for Magnum and, viewed narrowly, aimed at facilitating the NELSA takeover by deceiving the Registrar, among others.
Accused 2 and 3 were therefore correctly convicted in respect of the first leg of count 1 and it is unnecessary for the present purposes to consider the second.
As far as sentence is concerned I am not persuaded that the
11
trial Judge misdirected himself. He drew a fully warranted distinction between the blameworthiness of accused 2 and that of accused 3 and their respective sentences reflect that difference appropriately. They also mirror a balanced assessment of the competing mitigating and aggravating features of the case. The latter clearly predominate. To establish a commercial empire was one thing. To do so illicitly at the expense of SABA was quite another. SABA's elimination from the financial scene was only prevented at a cost to its parent bank of many millions.
The appeal is dismissed in all respects.
C T Howie PLEWMAN JA) concurs
30-MAY-1997 14=03 THE CONSTITUTIONRL LUUKi
3 0 NAT
/OS
THE CONSTITUTIONAL COURT OF SOUTH AFRICA
30 May 1997
K J R Summerley P 0 Box 46165 ORANGE GROVE 2119
Dear Sir
Ppnningtnn&ANO v The Stqfr (C.CT 14/97)
I have been asked by the President of the Constitutional Court to advise you that there is no provision for noting an appeal from a decision of lhe Supreme Court of Appeal to the Constitutional Court. He is, however, treating your notice as an application in terms of section 167 of the Constitution to secure the leave of the Constitutional Court to appeal against the decision given by the Supreme Court of Appeal on the constitutional issues raised in the appeal.
Yours faithfully
du Plessis
ERECTOR : CONSTITUTIONAL COURT cc: Attorney-General
Johannesburg
THE REGISTRAR OF THE CONSTITUTIONAL COURT
BRAAMPAIUC FORUM II, 33 HOOFD STREET, BRAAMTONTEIN, JOHA.NTCSBURG 2017 PRIVATE BAGX32,BRAAMFONTEOT2017
TELEPHONE:; ( O i l ) 403 8032,FACSIMILE; ( O i l ) 403 6524.
TOTAL P . S l ^ • .
K.J.R SUMMERLEY
A TTORTiEY/PROKUREUR
28 St John's Road HOUGHTON Johannesburg 2198
TEL: (021)487 3013/4 FAX: (Oil) 648 4393
P O Box 46165 ORANGE GROVE 2119 REPUBLIC OF SOUTH AFRICA OUR REF; MR K J R SUMMERLEY/bh/GT003
YOUR REF:
2 June 1997
The Registrar of the Constitutional Court Braampark Forum II, 33 Hoofd Street Braamfontein JOHANNESBURG
GRIFFIER VAN DIE KCNSTITUS10NEU HOF PRIVAATSAK/PRtVATE BAG X32
1997 -06- 0 2
BRAAMFONTEIN 2017 REGISTRAR OF THE CONSTITUTIONAL COURT
Dear Sir
re: PENIMIIMGTON & ANO v THE STATE (CCT14/97)
Thank you for your letter of 30 May 1 997. We have consulted our counsel and advise as follows:
Under s 1 67{3) of the 1 996 Constitution, the Constitutional Court is the ultimate court of appeal on constitutional issues. No legislation or rules (as contemplated by s 167(6)) yet regulate the manner in which the court becomes seized of an appeal and, as a result, it seems -
1. that the present rules must be read as governing this appeal mutatis mutandis. Rule 20, which appears to be applicable, give the accused in a criminal case an automatic right of appeal to the court; alternatively
2. that the court {which we submit means the court taken as a whole), in the exercise of its powers to regulate its own process conferred by s 173, must lay down the procedure to be followed and, in doing so, will be minded to take into account the procedures that applied under the interim constitution lest injustice should arise by reason of a disparity in treatment.
As a result we respectfully submit that leave to appeal is unnecessary in the present matter and that our clients are entitled to a hearing on the merits of their constitutional objections as of right. If this issue remains contentious, our clients submit, once again respectfully, that it should not be resolved against them without the hearing of argument by the court, which it is submitted is a right they have in law.
21...
KEVIN JOHN ROLLO SUMMERLEY B.A. U B (WITS)
-2-
An application for bail was successfully argued before Marais J on 28 May 1997.
The founding affidavit elaborates, to an extent, on the matters referred to above and we enclose it herewith, (without Annexure B - the Judgment - which is already in your possession), in the hope that it might provide some measure of assistance in deciding the procedural issues.
We would be grateful if you would draw this letter to the attention of the President of the Court.
Yours faithfully
K J R SUMMERLEY
KEVIN JOHN ROLLO SUMMERLEY B.A. LLB (WITS)
ro/sumer2
THE CONSTITUTIONAL COURT
CCT 14/95 4 June 1997
K J R Summerley P 0 Box 46165 ORANGE GROVE 2119
LETTER FAX: 011-648 4393 PAGES: TWO
PENNINGTON AND ANOTHER vs THE STATE
I have been asked by the President of the Constitutional Court to respond to your letter of 2 Jvme 1997 as follows;
1. The applicants/appellants may address written argument to the Court on - 1.1 the procedure to be followed in the present case. In particular the argument
should deal with the question why, in regulating its own process in terrm '••!
section 173 of the 1996 Constitution, the Constitutional Court should aliov >.:i automatic right of appeal in a criminal matter from a decision of the Supreme Court of Appeal. In this regard, and with particular reference to the quest) on whether the practice should be to allow an automatic appeal, or only an appeal with leave of the Constitutional Court, the applicants/appellants are required in their written argument to deal with -
(a) the provisions of section 167(6) of the 1996 Constitution and section 102(11) of the interim Constitution; and
(b) the weight to be given to judgments of the Supreme Court of Appeal, bearing in mind its status in the hierarchy of the courts; and
BRAAMFARK FORUM U, 33 H O O P D STREET. BRAAMFONTEIN, JOHANNESBURG 2017 PRIVATE BAG X 32, BRAAMFONTEIN 2017
TELEPHONE: <011> 403 - 8032, FACSIMILE: (011) 403 * 6524 E . MAIL: REGISTRARGCONCOURT.ORG.ZA
/
(c) any other matter considered by the applicants/appellants to be relevant to this issue; and
1-2 their prospects of success on appeal.
2. The written argument shall be lodged with the Registrar of the Constitutional Court by not later than Tuesday 17 June 1997,
Yours f aithfully
DUPLESSIS
DIRECTOR: CONSTITUTIONAL COURT
cc: Attorney-General Johannesburg
TOTAL P.Q2.
